market-analysis

Psychosizing Market Analysis In A Nutshell

Psychosizing is a form of market analysis where the size of the market is guessed based on the targeted segments’ psychographics. In that respect, according to psychosizing analysis, we have five types of markets: microniches, niches, markets, vertical markets, and horizontal markets. Each will be shaped by the characteristics of the underlying main customer type.

Introducing the Psychosizing Market Analysis

Mapping the existing context or the potential context a company’s business model is developed into, is critical. Your market type will be the initial box where your company will operate. It will also be the foundation to move to larger markets, that can develop as a result of wider adoption (market development) or as a result of you taking more space within that existing market (market expansion).

market-sizing
Market sizing is the estimation of the potential of a market. Incorporating market research, market sizing is useful for businesses looking to introduce a new product or service to evaluate the business opportunity. Market sizing also helps investors to understand the value of the potential opportunity within the target company’s business plan.

Types of markets in Psychosizing

In traditional economics terms markets can be broken down in four main types as shown below:

market-types
A market type is a way a given group of consumers and producers interact, based on the context determined by the readiness of consumers to understand the product, the complexity of the product; how big is the existing market and how much it can potentially expand in the future.

However, for the sake of psychosizing we want to understand how big might be the market based on the main customer types. For the sake of it, we’ll draw into the technology adoption curve, to understand the main types of customers we might have in a tech-driven economy.

technology-adoption-curve
In his book, Crossing the Chasm, Geoffrey A. Moore shows a model that dissects and represents the stages of adoption of high-tech products. The model goes through five stages based on the psychographic features of customers at each stage: innovators, early adopters, early majority, late majority, and laggard.

Innovators 

Innovators are the first to take action and adopt a product, even though that might be buggy. Those people are willing to take the risk, and those will be the people ready to help you shape your product when that is not perfect. Innovators usually represent a small niche, what we can call a microniche.

microniche
A microniche is a subset of potential customers within a niche. In the era of dominating digital super-platforms, identifying a microniche can kick off the strategy of digital businesses to prevent competition against large platforms. As the microniche becomes a niche, then a market, scale becomes an option.

Early Adopters 

Early adopters are among those people ready to try out a product at an early stage. They don’t need you to explain why they should use that innovation. The early adopter has already researched it, and she is passionate about the innovation behind that. In this case, early adopters will help you take advantage of a larger subset of a market, a niche.

niche-marketing

Early majority

The early majority is the psychographic profile made of people that will help you “cross the chasm.” Here you move past the niche and enter into a more developed market, still small but yet with a defined customer type that goes beyond the innovator and the early adopter.

Late Majority 

The late majority kicks in only after a product is well established and it has a more skeptical approach to technological innovation and it feels more comfortable in the adoption only when a product has gone mainstream. In this case, you might be able to draw into a larger market, even though still mostly vertical. This means that there is still a primary customer type driving that market and a primary commercial use case.

vertical-market
A vertical or vertical market usually refers to a business that services a specific niche or group of people in a market. In short, a vertical market is smaller by definition, and it serves a group of customers/products that can be identified as part of the same group. A search engine like Google is a horizontal player, while a travel engine like Airbnb is a vertical player.

Laggards

Laggards are the last in the technology adoption cycle. While the late majority is skeptical of technological innovation, the laggard is adverse to it, unless there is a clear, established advantage in using a technology those people will hardly become adopters. Here the market size will have achieved its highest in terms of potential size, and you might be able to draw into a horizontal market, able to adapt to many commercial use cases and many potential customer types.

horizontal-market
By definition, a horizontal market is a wider market, serving various customer types, needs and bringing to market various product lines. Or a product that indeed can serve various buyers across different verticals. Take the case of Google, as a search engine that can serve various verticals and industries (education, publishing, e-commerce, travel, and much more).

Key takeaways

We can analyze the market by using various psychographics and determine the potential market size. This model is a simplification of how real markets look like and only useful to understand the existing potential of a company’s business model a define a clear short-term strategy.

Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"